What is accounts payable aging?

Definition

Accounts payable aging is a report that groups unpaid vendor bills by how long each one has been outstanding. It is a view of the accounts payable already on the books, not a new account you post to.

The usual buckets are current, 1–30 days, 31–60 days, 61–90 days, and over 90 days. Each open bill lands in one bucket so you can see which vendors are waiting and how late each balance has become.

Where it shows up

Balance Sheet: Related to the open accounts payable the report splits by age.

P&L: Related to nothing extra; the expense was already recorded.

Cash flow: Related to which of those bills will leave cash on the next run.

See also: Accounts Payable · Days Payable Outstanding · Vendor Bill

When you look at the Balance Sheet, the grand total of this report should equal the accounts payable line in current liabilities. If the totals do not match, a bill is missing from the report, sitting in the wrong vendor, or already paid in the bank but not cleared in the ledger.

The Income Statement does not gain a line when you run this report. The expense hit the P&L when the bill was entered, so the aging only tells you what is still unpaid.

Cash on the Statement of Cash Flows moves when you actually pay a bill in those buckets. A large current bucket means cash will likely leave soon, while a large over-90 bucket means cash has been held and a vendor may stop shipping.

Days payable outstanding is the average number of days the business takes to pay vendors. This report is the detail behind that average, bill by bill.

How it works

A vendor bill is entered when goods or services have been received. It stays open until a payment clears it, and the aging report reads only those still-open rows.

Age is measured from the bill date or from the due date, depending on how the file is set. A bill dated March 1 that is still unpaid on April 15 is 45 days old on a bill-date aging, even if the terms were net 30.

The software then drops each open bill into a bucket. Current usually means not yet due, and the 1–30, 31–60, 61–90, and over-90 columns are past due from that same date rule.

You pull the report before a check run. Pay what is due, hold what can wait, and follow up on anything that is old because it was disputed, never received, or coded to the wrong vendor.

Nothing journals when the report runs. It only reads the open payable detail behind the control account.

If you change a due date or apply a payment, the next run of the report will move that bill to a different bucket or drop it entirely. Credits from vendors reduce the open balance and can push a bill back toward current or off the report.

A bill that is fully paid disappears from the next run. A bill that is only partly paid ages on the remaining amount.

Example

A cafe prints its bakery bills on Thursday before Friday's check run. The bakery is owed $2,400 that is still current, $800 that is 18 days past due, and $150 that is 72 days past due on a disputed flour delivery.

The current $2,400 will leave cash on this week's run if the bread arrived as billed. The $800 gets a call first, then payment if the loaves were received.

The $150 stays in the 61–90 bucket until the dispute is settled. The Balance Sheet still shows all $3,350 in accounts payable until something is paid or credited.

The cafe does not post a journal to create this picture. It is a printout of open bills.

After Friday's $2,400 payment posts, a new run should show only the $800 and the $150. Those two bills stay in the same buckets unless enough extra days have passed to push them over the next threshold.

Common mix-ups

The aging report is not the accounts payable account. The account is the liability on the Balance Sheet, and the report is that same balance split by age.

Aging is not the same as days payable outstanding. Days payable outstanding is one average, and the report is the list that produces that average.

Aging is also not the same as a plain open-payables list. An open-payables list shows every unpaid bill, while aging groups those bills by how long they have been outstanding.

Related terms

• Accounts Payable: Amounts the business owes vendors for goods or services already received.
• Days Payable Outstanding: The average number of days the business takes to pay its vendors.
• Vendor Bill: The invoice a supplier sends that becomes a payable.
• Check Run: The scheduled batch in which approved vendor bills are paid.
• Open Payables Report: The list of vendor bills approved but not yet paid.
• Cash Flow Forecast: A forward projection of cash receipts and payments.
• Subledger: A detailed ledger behind a single control account, such as receivables or fixed assets.
• Payment Terms: The agreed deadline and conditions for paying an invoice.